MasterCard Delighted At OFT Decision Overruling

June 19, 2006

By Peter Kenny

MasterCard said it is pleased by today’s ruling, taken by the Competition Appeal Tribunal (CAT) to overturn a previous decision taken by the Office of Fair Trading (OFT) over interchange fee arrangements.

Interchange fee arrangements are charges that retailers pay banks who issue the credit card used in a purchase.

As the retailers add the interchange fee to their products, the OFT argued that these fees were excessive and compared them to an extra tax on consumers.

The OFT had originally made a decision back in September last year stating that interchange fee arrangements set by the MasterCard UK Members Forum (MMF), which many credit card issuing banks are a member of, infringed competition rules.

The OFT withdrew its statement of objections at the CAT today, however, did stress that they will continue to pursue MasterCard over its current fees which were issued in November 2004.

MasterCard General Counsel Noah J. Hanft said, “We applaud the CAT's action to quash the OFT Decision, rendering it a nullity - without force or effect.”

“MasterCard has always maintained that these interchange fees, and the manner in which they were established, were entirely lawful because, among other things, they enabled MasterCard's credit card business in the UK to compete effectively with other payment providers.”

“While we are pleased that the OFT has finally walked away from what was an ill-considered case, it is unfortunate that it took the OFT nearly six years to realize the weakness of its case and recognise the strength of MasterCard's arguments. MasterCard has, therefore, asked the CAT to award it costs in connection with the appeal.”

A spokesperson for the OFT said, “We are proceeding with a second investigation into current arrangements for interchange fees."